Start-up Advice after Founder Friday Women 2.0

Most start-up events waste my time. Founder Friday Women 2.0 was one of the few exceptions.

Generally,  at start-up events, the people who have an actual company make up a tiny fraction of the attendees, being out-numbered at least 5 to 1 by people with “an idea for a company”. The remainder of those in attendance are in insurance, law or other companies selling to start-ups. Nothing wrong with that and at one event we actually met a company we signed a contract with, so it’s not always a waste of time.

I think most people running actual companies are like me, they are too busy doing things to have a lot of time to spare for drinks with people talking about what they are going to do.

Our Chief Marketing Officer insists that I get out of the office and network. She believes everyone in the company, regardless of job title, should pitch, present or exhibit our games at least once a month. So … I agreed to put up a table at Founder Friday ‘s Women 2.0 event in Los Angeles.

There are only two guarantees that your time at a start-up event won’t be completely wasted; 1. You get to pitch/ present your company or 2. There is a speaker you can learn from.

Founder Friday, Women 2.0 had both. I did get to discuss 7 Generation Games with a number of people, but most helpful for me was the speaker. I tweeted about the event and a couple of people asked me her name. It was Jody  Dunitz, and she is an investor with the Tech Coast Angels, which is the largest angel investor group in the country. Most of her talk was about how she personally decided whether a company was a good investment. Here are the main points from my notes:

• She looks at three things.
• Look at the product first. It must be innovative in some way. Status quo is a huge barrier to overcome. You can have a greatly superior X but if people already have an X then they are very inclined to stay with that. (Take the example of a car. You’re probably not going to go out and buy a new car right now just because a better car came out on the market. If you have a Prius, when it comes time to buy a new car, you’re likely to just buy another Prius. )
• You need to have a product. “There has to be some there there.” Too many people have just an idea but no actual product. It can be a prototype, a minimal viable product, but there has to be something.
• You need to have a way that you are going to make money. Too many people say they are going to scale up and then be acquired for $19 billion. You need to have a way that you are going to make revenue.
• Second, she looks at the team. Some investors may look at the team first.
• She is extremely reluctant to invest in a company with a sole founder. To make up for being a sole founder they would have to have some other aspect of the company  that was really extraordinary.
• There isn’t a magic number of founders to have on your team but whatever the number is, it’s more than one.
• The key member of the team is the CEO. The CEO should be knowledgable about all aspects of the company. He or she doesn’t have to write code but should at least understand the technical aspects of a product and not have to go ask the CTO. The CEO should understand the financial situation and not have to go ask the CFO.
• Third thing she looks at is valuation. Founders always think their company is worth more than investors do. Founders look at how much time and effort they have put into it. Investors look at how much money they think they can make.
• Angel investors look for a 10x return in 5-7 years. It used to be 3-5 years but there is more competition from accelerators, incubators and different investor groups now, so the horizon has gotten a bit longer.
• Growth in venture capital has not matched the pace of growth in angel investment, so a higher proportion of companies than previously now get angel funding but fail to get venture capital and die.
• Angels are looking for a 10X return. They need a high return to make up for all of the companies that fail and don’t make anything.
• If your company looks like it may pay 10-20% returns, they aren’t interested. In that case, it would make more sense to invest in something like Apple stock.
• Startup companies at the Angel level are usually valued at $2- $4 million
• When founders are deciding whether an angel investor is a good fit, the first thing they should look at is rapport, do they get along. Is this person interested in their company over and above the money it can make? Will the investor bring something to the deal in addition to money – connections with key customers, knowledge of the industry.

Two main points I took away from it for me personally are,

1. Our team is doing a lot of things right.
2. We need to stress more how 7 Generation Games is different from other educational gaming companies. I got right on that.

7 Generation Games – Grand Theft Auto – but with horses and math, and for kids. 

For $9.99 you can quit arguing with your kids about math homework.